What Does My Mortgage Have to Do with Wall Street?

by Osman Parvez
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Why is it that the Fed is cutting rates but mortgage rates haven't changed? Ever wonder what your mortgage has to do with Wall Street?

I could spend a long time writing about this subject. The simple answer is that a complex web of global financial institutions take monthly mortgage payments and repackage them into securities that other investors and institutions buy and sell. Because the relationship is indirect, the impact to mortgage rates is not linear. A quarter point cut to the discount rate doesn't necessarily translate to a quarter point cut in mortgage rates. Here's a chart that does a great job of illustrating some of the relationships between your mortgage payment and Wall Street. Click the image for a larger view.

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1 comment:

I actually have wondered this, but I'm terrified of economics in general so I'll just wait to do something about it until I'm actually in a position to refinance the house, anyway. Hey, maybe you could do a post on that...although it's not very real estatey, is it? More mortgagey.

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